US New Home Sales Slump in July as Consumer Confidence Hits Seven-Month Low

Sales of new single-family homes in the United States fell sharply in July, while consumer confidence dropped to its lowest level in seven months, according to fresh data released on Tuesday.

The Commerce Department reported that new home sales declined 10.5% to a seasonally adjusted annual rate of 607,000 units last month, the lowest since January. This follows an upwardly revised pace in June. New home sales, which are recorded at contract closing, represent a small portion of overall U.S. home sales and are known for their month-to-month volatility. On a year-over-year basis, sales were down 6.3% in June.

The median price of a new home fell to $393,800 in July, marking the lowest level in four years and a 0.9% decrease from a year earlier.

High borrowing costs continue to be a major factor dampening the housing market. A separate report from the Conference Board showed that only 5.2% of American consumers plan to purchase a home within the next six months, a significant drop from 6.5% in July and the largest monthly decline in over five years.

"The housing market isn't headed for a downturn, but rising mortgage rates and weaker growth in real disposable income due to elevated inflation will keep any rebound out of sight," said Matthew Martin, Senior US Economist at Oxford Economics.

The average rate on a 30-year fixed-rate mortgage, the most common U.S. home loan, remains near its highest level in over a year. The Mortgage Bankers Association reported the rate held at 6.77% in the week ending August 14, just below its recent high of 6.81%. Mortgage rates have climbed roughly 0.60 percentage points since late February, a rise attributed to increased global oil prices and broader inflation pressures.

The Federal Reserve has kept interest rates steady since December, though three policymakers dissented at last month's meeting, preferring a rate hike to combat inflation that has exceeded the 2% target for over five years. Fed Chairman Kevin Warsh is scheduled to speak on Friday at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming, where investors will be listening for his views on the economy and recent bond market trends.

The Conference Board's consumer confidence index fell to 89.4 in August from a downwardly revised 90.2 in July. The decline was driven by a 7.8% slide in the expectations index, which offset an improvement in consumers' assessment of current conditions.

"Consumers are optimistic about today but increasingly nervous about tomorrow," said Jeffrey Roach, Chief Economist for LPL Financial. "Assessments of current conditions improved materially, while future expectations fell to their lowest level since January as Middle East tensions and income concerns weighed on sentiment."

Consumers also expect inflation to accelerate over the next 12 months, with their outlook rising to 5.8% from 5.6% in July.